Prime Minister Abiy Ahmed has announced a new framework agreement between the National Bank of Ethiopia and the International Finance Corporation (IFC) to establish the country's first dedicated mortgage refinance company. The institution, which is set to be capitalized at 100 billion ETB, aims to resolve long-standing liquidity challenges within the banking sector and facilitate the delivery of 1.5 million affordable homes over the next five years.
The IFC is expected to contribute a minimum of $200 million toward the initiative. The signing, led by NBE Governor Eyob Tekalign Tolina, follows an official visit to Ethiopia by IFC Managing Director Makhtar Diop, who held discussions with government leaders regarding private-sector investment and economic reform. This announcement marks the Prime Minister's public update in over three weeks.
The Mortgage Refinance Model
The proposed institution is designed to function as a wholesale, non-deposit-taking entity. Rather than lending directly to homebuyers, it will provide liquidity to primary mortgage lenders by purchasing or refinancing existing mortgage portfolios. By issuing bonds into the domestic capital market and utilizing institutional funding, the company aims to bridge the maturity mismatch that currently hinders long-term mortgage lending, where banks often rely on short-term deposits to fund long-term assets.
Market Context and Previous Challenges
The move addresses structural hurdles that have historically limited the mortgage market. Previous attempts to establish specialized mortgage banking, such as the launch of Goh Betoch Bank in 2021, faced difficulties due to the absence of a dedicated mortgage regulatory framework and limited access to long-term funding sources like pension funds. Consequently, many banks have shifted toward more diversified commercial lending to maintain sustainability.
The ambition to construct 1.5 million homes represents a significant scale-up of national housing efforts. For context, historical projects like the Integrated Housing Development Program (IHDP) delivered approximately 400,000 units over 12 years. Analysts note that while the 100 billion ETB capitalization provides a foundation, the success of the new facility will depend on its ability to standardize underwriting criteria and effectively bridge the gap between long-term institutional savers and the primary mortgage market.
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